Talks and Letters 

EU talks on China heat up while EU's new envoy dodges a bullet

Editor's Note: Welcome back, dear readers! We hope you had a wonderful summer break! In this edition of the CCCEU Weekly Update, we'll give you a quick rundown of the EU's most recent discussions on China, including those that occurred in Spain, where the bloc's foreign affairs arm hosted a week-long forum on a geopolitical EU; MEPs criticised the EU's new envoy to Beijing for his less assertive remarks regarding China, but he received support from people in high places. To subscribe, please write to info@ccceu.eu. Enjoy your reading and have a lovely weekend.

Brussels appears to be getting busier by the day as September draws near. In mid-September, President of the European Commission von der Leyen will deliver her annual "State of the Union" speech in Strasbourg, France, covering important strategic announcements in trade, science, and technology, as well as foreign policy, among other topics. The section on China has consistently garnered a lot of interest. Perhaps as a result, there has been a noticeable increase in the frequency of discussions about how the EU institutions view their relations with China this week compared to previous weeks, focusing on how they view current relations between China and Europe.

First, let us turn to a fresh statement made by Mr. Bretton, the EU Commissioner for the Internal Market. In his speech titled "Neither autarchy nor dependence – more European autonomy" at the weeklong forum "QuoVadisEuropa" in Santander, Spain, on Thursday, Bretton made seven references to China, according to the text made public by the European Commission.

Mr. Breton claimed that the EU had built more new bridges with world powers, including China (editor's note: he may refer to the huge Chinese-built bridge that connects Dubrovnik to the rest of Croatia and was inaugurated last month), saying that the EU continues to face challenges in vaccines, defence, digital, energy, space, green technology, and other areas in the context of new geopolitical situations and crises.

He appeared pleased with the EU's battery progress, claiming that it began from scratch five years ago and is now investing three times as much in batteries as China. The EU has identified 70 major projects, including 20 giga-factories. "At this pace, by 2030, we will be able to cover 90% of demand in Europe."

He believes that in order to protect its economic interests, Europe should strengthen its "supply chain diplomacy", and that access to raw materials, for example, will become even more critical as 30 million electric vehicles are expected to be on European roads by 2030, necessitating the production of the same number of batteries.

In the case of lithium, cobalt, and graphite, Europe remains heavily reliant on third-country supplies, led by China, he said. For example, the supply of refined lithium outside the EU could be as high as 100% despite the fact that Europe has deposits. He went on to say that the same is true for motors, specifically the permanent magnets that comprise them, "and for which China controls the entire value chain".

He cautioned that the EU's goal of zero-emission mobility would be at risk due to raw material shortages or rising costs without better access to raw materials. "We need the capacity to separate, refine and recycle raw materials, which are also too often concentrated in China."

In an effort to fine-tune his claims, Mr. Breton stated that the EU "must continue to use our foreign trade channels".

Second, at the "Quo Vadis Europe" forum, a panel titled "The War in Ukraine, China and the Global South" took place on Thursday. It discussed how to view Russian-Chinese relations in the context of the war in Ukraine, the tensions in the Taiwan Straits, and China's development trajectory.

The US tends to see China and Russia as one, while some voices in Europe argue that China is not Russia and "therefore needs to be treated differently". The panel said that China supports the Russian position both domestically and internationally; and in terms of trade and energy relations, China has said it does not follow Western sanctions but "there has not been a transgression of certain boundaries". Military support is the EU's threshold, but there has been "relatively limited indications for the systematic support" by Beijing's on Moscow.

It was also stated that there was a trend toward polarisation in the areas of economics and security, while China's focus on cooperation with the G7, G20, and others, as well as its Belt and Road Initiative, a systematical diplomatic, political, and economic effort, and were impressive and effective in many ways in its relations with the global South. China is preparing for turbulence and bolstering its strength during a time of increased global uncertainty. The EU has to prepare for a stronger China.

Additionally, it was stated that the US and Europe do not always agree, particularly when it comes to China and its realities. The EU may be able to mediate between the US and China. Because a confrontational, black-and-white approach does not define the world or Europe, Europe needs to articulate "very clearly how to articulate these three axes that define its position regarding China".

The meeting noted that China was very "adaptable" in Latin America in terms. The European Commission has recently been working to redefine Latin America, a region that Europe "abandoned" and ignored ten years ago. The EU should deepen its ties with Latin America during Spain's rotating Presidency of the Council of the EU, which will begin in the second half of 2023.

Next, a hearing. In fact, it appears that the debates around China will go on. On August 31, the Committee on Foreign Affairs and the Special Committee on foreign interference in all democratic processes in the European Union, including disinformation will hold a joint public hearing on "The Chinese and Russian influence in various regions of the world".

The hearing will "examine the attempts of China and Russia to gain influence in different parts of the world, such as the Western Balkans, MENA Countries, Latin America and on the African continent", a European Parliament statement said, adding it will also consider the impact of Chinese and Russian activities on the geopolitical situation in light of the Russian war in Ukraine. The event will be webstreamed.

More discussions about China are expected, with the European Parliament's Committee on Human Rights holding a hearing on the subject. It will be interesting to see how President von der Leyen addresses China in her "State of the Union" address on September 14th.

Along with these three significant events, there have been recent tidbits about the upcoming appointment of the new EU ambassador to China, and interestingly enough, the parties involved are from Spain.

In July, three Catalan members of the European Parliament questioned the stance of the Spanish diplomat, Jorge Toledo, the newly appointed EU ambassador to China, suggesting he was too pro-China.

In a recent interview, Toledo stated that the "EU strategy defines China as a partner". When asked about the definition of China as a systemic rival, Toledo replied that the EU and China "are societies with very different values and political systems". Regarding Taiwan, Toledo claimed that "the EU defends the pacific reunification" of Taiwan with China. He described the human rights situation in China as "not the best but not the worst".

The three MEPs asked the EU's foreign affairs chief, Mr. Josep Borrell, to "reassess the appointment of Toledo as EU Ambassador to China".

On Friday, Borrell, a veteran Spanish diplomat, responded in support of Toledo and made it clear that the EU and its Member States are still committed to the One China Policy.

He added that within the EU's "One China" policy, the EU recognises the government of the People's Republic of China as the sole legal government of China, while also pursuing friendly relations and close cooperation with Taiwan in a wide range of areas. In short, the EU does engage with Taiwan even in the absence of diplomatic recognition while also pursuing friendly relations and close cooperation with Taiwan in a wide range of areas.

"The Ambassador-designate will take up his functions after he has presented his credentials," he concluded.

GDP and employment up in Eurozone in Q2

According to Eurostat, in the second quarter of 2022, seasonally adjusted GDP increased by 0.6% both in the euro area and in the EU, compared with the previous quarter, according to a flash estimate published by Eurostat, the statistical office of the European Union. In the first quarter of 2022, GDP had grown by 0.5% in the euro area and by 0.6% in the EU.

The number of employed persons increased by 0.3% both in the euro area and in the EU in the second quarter of 2022, compared with the previous quarter. In the first quarter of 2022, employment had increased by 0.6% in the euro area and by 0.5% in the EU.

EU, Eurozone annual inflations hit record high, again 

According to Eurostat, the euro area annual inflation rate was 8.9% in July 2022, up from 8.6% in June. A year earlier, the rate was 2.2%. European Union annual inflation was 9.8% in July 2022, up from 9.6% in June. A year earlier, the rate was 2.5%. These figures are published by Eurostat, the statistical office of the European Union.

In July, the highest contribution to the annual euro area inflation rate came from energy (+4.02 percentage points, pp), followed by food, alcohol & tobacco (+2.08 pp), services (+1.60 pp) and non-energy industrial goods (+1.16 pp).

Europe is experiencing worst drought in 500 years

According to CNBC, Europe is experiencing its worst drought in at least 500 years, with hot and dry conditions fueling wildfires, reducing crop yields and reducing electricity generation, according to a preliminary analysis from the European Union's Joint Research Center.

The report from the European Drought Observatory said that 47% of Europe is under warning conditions, with a clear deficit of soil moisture, and 17% of the continent is under a state of alert, in which vegetation is impacted.

German exports fall by 7.6 pct in July 

According to Xinhua, German exports to third countries outside the European Union in July fell by 7.6 percent month on month to 56.8 billion euros (56.8 billion U.S. dollars), the country's Federal Statistical Office (Destatis) said on Monday.

Due to a sharp rise in foreign trade prices, nominal exports from Europe's largest economy still grew 5.5 percent year on year, according to Destatis.

China's FDI inflow up 17.3 pct in first seven months

According to Xinhua, Foreign direct investment (FDI) in the Chinese mainland, in actual use, expanded 17.3 percent year on year to 798.33 billion yuan in the first seven months of the year, the Ministry of Commerce said Thursday.

In U.S. dollar terms, the inflow went up 21.5 percent year on year to 123.92 billion U.S. dollars.

The service industry saw FDI inflows jump by 10 percent year on year to 598.92 billion yuan, while that of high-tech industries surged by 32.1 percent from a year earlier, data from the ministry showed.

What are experts talking about?

"Where does Europe's energy transition lie?" published by Institute of Industrial Economics, Chinese Academy of Social Sciences. The author is Yang Danhui. The article briefly introduces the current energy crisis in Europe and its strategic adjustments and points out the current European energy strategy is in large part a passive solution to the "contradictions in progress" under external shocks.

The article concludes by emphasizing that, in the long run, energy transition is a top priority for climate governance and an important path to global carbon neutrality. The energy transition is long-term, complex and systematic, and cannot be achieved overnight, and is inevitably subject to various risks and uncertainties, which should be fully understood and planned for.

"Word Economic Outlook" updated in July by IMF. The report states that with increasing prices continuing to squeeze living standards worldwide, taming inflation should be the first priority for policymakers. Policies to address specific impacts on energy and food prices should focus on those most affected without distorting prices. And as the pandemic continues, vaccination rates must rise to guard against future variants. Finally, mitigating climate change continues to require urgent multilateral action to limit emissions and raise investments to hasten the green transition. 

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.